The Price of Gold Continues to Weaken, Options Market Betting on Pressure for the Next Two Years, Some Contracts Suggesting Another 40% Drop

BlockBeats News, June 11th, according to CNBC, amid a continued pullback in gold prices, the sentiment in the derivatives market has clearly turned bearish, with traders increasing their bets on further downside. Some long-term options are even pricing in a potential further 40% drop in gold price over the next two years.

Option data around the SPDR Gold Shares gold ETF shows that during a single-day gold price drop of over 4% on Wednesday, out of approximately $200 million in option premiums traded, around $130 million was concentrated in put options, while the scale of sold call options remained higher than bought call options.

The transaction structure shows that out of the 10 most active option contracts of the day, 8 were put options, with most trades at the ask price or higher, reflecting funds actively positioning for downside risk.

Since hitting a peak in February, GLD has already seen a cumulative decline of about 25%, with selling pressure continuing. In certain long-term contracts, a put option expiring in June 2028 with a strike price of $240 saw active trading, implying a downside potential of around 40% based on the current price, indicating that some investors are betting on the continuation of a medium- to long-term bear market cycle.

On a macro level, market analysis points to multiple factors weighing on the gold price, including some central banks and sovereign entities rebalancing their portfolios, changes in geopolitical fund demand, and passive selling triggered by technical stop-losses.

In contrast to the physical gold market is the mining stock option structure. The VanEck Gold Miners ETF options market is showing a bullish sentiment, with significantly higher trading volume in call options compared to put options. Some strategies indicate that funds are more inclined to indirectly hedge through mining stocks.